Elizabeth Warren Should Bow Out to Spur Change: William D. Cohan

May 31 (Bloomberg) -- Surely Professor Warren is clever
enough to see the proverbial writing on the wall. The
inconvenient truth facing Elizabeth Warren, the controversial
Harvard Law School professor President Obama would like to run
the newly created Consumer Financial Protection Bureau, is that
she has made herself so bloody disagreeable on Capitol Hill that
she has obliterated her chance of winning the Senate votes she
needs to be confirmed.

Accordingly, for the good of the country, she should stop
the charade now and resign her temporary post at the new agency
so that a more politic leader can be found (and confirmed),
enabling the agency’s important work of protecting consumers
from all sorts of predatory behavior to get underway full-throttle.

Warren can then get a well-deserved pat on the back and
return to Harvard to contemplate the suggestion made last week
by Democratic Party officials that she consider a 2012 run for
the Senate against Scott Brown, the centrist Republican who won
the special election for Edward M. Kennedy’s seat after Kennedy
died in 2009. (More free advice to Warren: Don’t take on Brown.)

It’s not that Warren wasn’t on to something when she
conjured up the idea for the bureau in a 2007 essay she wrote
for the journal Democracy titled “Unsafe at Any Rate” -- a
play on consumer advocate Ralph Nader’s 1965 book on the auto
industry, “Unsafe at Any Speed.”

Toasters and Mortgages

Warren wrote: “It is impossible to buy a toaster that has
a one-in-five chance of bursting into flames and burning down
your house. But it is possible to refinance an existing home
with a mortgage that has the same one-in-five chance of putting
the family out on the street -- and the mortgage won’t even
carry a disclosure of that fact to the homeowner. Similarly,
it’s impossible to change the price on a toaster once it has
been purchased. But long after the papers have been signed, it
is possible to triple the price of the credit used to finance
the purchase of that appliance, even if the customer meets all
the credit terms, in full and on time. Why are consumers safe
when they purchase tangible consumer products with cash, but
when they sign up for routine financial products like mortgages
and credit cards they are left at the mercy of their
creditors?”

The essay caught Obama’s eye, and in the aftermath of the
financial meltdown he and Warren made sure the new bureau was
included in the largely toothless Dodd-Frank financial re-regulation law.

High-Water Mark

In retrospect, that may have been Warren’s high-water mark.
Fearing last fall that she would not get the necessary votes in
the Senate to head the new bureau, Obama appointed her as his
special assistant to set it up, under the auspices of the
Federal Reserve, and make her “original vision a reality.” But
she can’t lead the new agency unless she wins Senate approval,
which must happen, or not, before the bureau opens officially on
July 21 . (Republicans last week used a procedural maneuver to
block any attempt by Obama to give Warren a recess appointment
over the Memorial Day weekend.)

Warren’s personal style has angered many congressmen. At a
hearing last week before a subcommittee of the House oversight
committee, Warren and the subcommittee’s Republican chairman,
Patrick McHenry of North Carolina , got into a petty row about
whether or not Warren could stay at the hearing for more than an
hour. When McHenry sought to adjourn the hearing so that the
committee members could attend a floor vote before returning to
continue, Warren objected because she believed she had informed
McHenry’s staff that her time was tight. That’s when the gloves
came off.

“Congressman, you are causing problems,” Warren said.
“We had an agreement.”

“You’re making this up,” Mr. McHenry replied, causing
audible gasps from the audience. “This is not the case .”

Accused of Lying

As the uncomfortable debate raged, Representative Elijah
Cummings, Democrat of Maryland, sought some peace. “Mr.
Chairman,” he said, “I’m trying to be cordial here -- you just
accused the lady of lying. You need to clear this up with your
staff .”

But McHenry did not concede any ground, reflecting what a
partisan lightning rod Warren has become. “I was shocked by
Ms. Warren’s blatant sense of entitlement,” he said in a
statement after the hearing. “She was apparently under the
assumption that she could dictate a one-hour time limit for her
testimony to Congress, and that we were there at her behest
instead of the other way around. This is just further example of
her disregard for Congressional oversight .”

Over to the Senate

This conflagration followed an already dicey conversation
earlier in the hearing about whether Warren had “lied” --
McHenry’s word -- in recounting her role in advising the
attorney general of Iowa about settling some mortgage-related
lawsuits. Warren said she got involved at the request of
Treasury secretary Tim Geithner; McHenry claimed she overstepped
her mandate.

Meanwhile, over in the Senate -- the body that actually
confirms appointees -- Warren is faring little better. In early
May, 44 Republican senators sent the president a letter saying
they would oppose any nominee of either party to head the bureau
until “the lack of accountability in the structure” of it is
“reformed.”

As the Senate’s top Republican, Mitch McConnell of
Kentucky, put it, the “deeply-flawed” Dodd-Frank law granted
the bureau’s director “unprecedented authority over financial
institutions and main street businesses” and has given him or
her “vast rulemaking, supervisory, investigative and
enforcement powers and the authority to regulate … not just
traditional financial institutions, but also potentially
thousands of entrepreneurs and small businesses.”

A Political Ploy

This reeks of a political ploy by the Republican senators
to gut an agency despised by their financial backers on Wall
Street.

Oddly, a number of political analysts viewed the
Republicans’ letter as tantamount to a “retreat” from fighting
Obama on Warren and predicted it would make a recess appointment
all but inevitable. Yet, having succeeded in averting that
scenario last weekend, Republicans are trying to thwart the
possibility of another attempt by refusing to recess over the
July 4 holiday. (Something about having one or two senators
stick around Washington over the holiday.) Enough shenanigans
already.

Although my Bloomberg View colleague Jonathan Alter has
argued forcefully that the Warren fight is worth having for
Obama, the truth is that while it may be a fight worth having,
it is not a fight that Obama can win.

Warren would be serving the president best if she just
realized this and returned to the Commonwealth of Massachusetts,
head held high.

(William D. Cohan is a Bloomberg View columnist. The opinions
expressed are his own.)